Buying An Investment Property: A Complete Guide

Loan for investment property

Investing in property has become a popular way to generate income and build long-term wealth. In 2020 Canada’s home sales reached a record high of 47.2%. In 2021, the average price of a home in Canada was $678,091. There are many reasons to invest in property. For some people, it’s a way to generate rental income. For others, it’s a way to build equity or wealth for the future. However, before you jump into the world of property investment, it’s important to do your research and understand the process. This guide will walk you through everything you need to know about buying an investment property in Canada, from finding the right property to securing financing. 

What is an investment property?

An investment property is a property that is purchased to earn a return on the investment, either through rent, future resale value, or both. Investment properties can be residential or commercial and can be single-family homes, apartments, or even vacant land. Investment properties are usually more expensive than properties that are purchased for personal use, as they must offer a higher potential return to justify the increased cost. 

There are many reasons why investment properties are often preferred over other types of investments: 

  1. They offer the potential for high returns. While stock market investments can go up and down in value, investment properties tend to appreciate over time, providing a solid source of income and capital gain.  
  1. Investment properties can provide a steady stream of income through rent payments. This can provide a valuable supplement to other sources of income and help to smooth out financial ups and downs.  
  1. Investment properties can offer significant tax benefits. The interest paid on a mortgage for an investment property is often tax-deductible, and the profits from selling an investment property are usually taxed at a lower rate than other types of income. 
  1. Investment properties can be a hedge against inflation. As prices rise over time, the value of an investment property tends to increase as well, providing a way to preserve the purchasing power of your money. 

Different types of investment properties you can buy

  1. Residential rental property: These are properties, such as single-family homes, apartments, and duplexes, that are meant to be rented out to tenants. The income from these properties comes from the rent payments made by the tenants.  
  1. Commercial property: These are properties, such as office buildings, retail space, and warehouses, that are used for business purposes. The income from commercial properties comes from the businesses that lease the space.  
  1. Industrial property: These are properties, such as factories and storage units, that are used for industrial or manufacturing purposes. The income from these properties comes from the businesses that lease the space.  
  1. Hospitality property: These are properties, such as hotels and resorts, that are used for the purpose of providing accommodation to guests. The income from these properties comes from the fees charged to guests.  
  1. Mixed-use property: These are properties that are used for both commercial and residential purposes. The income from these properties comes from the businesses and tenants that lease the space. 

Considerations before buying an investment property

  1. Location: The location of an investment property is one of the most important factors to consider. The property should be situated in an area with a strong economy and good infrastructure. It should also be in an area that is expected to experience population growth in the future.  
  1. Property type: The type of property you purchase will have a big impact on the return you can earn on your investment. Residential properties tend to be less risky and offer more stable returns, while commercial properties can offer higher returns but are more volatile.  
  1. Financing: When purchasing an investment property, it is important to get pre-approved for a loan and to compare interest rates from different lenders. It is also important to have a down payment of at least 20% to avoid paying private mortgage insurance (PMI).  
  1. Rental income: The amount of rent you can charge will have a big impact on your return on investment. To maximize your rental income, research the market rents in the area and make sure your property is priced accordingly.  
  1. Operating expenses: The operating expenses of an investment property, such as repairs, maintenance, and utilities, can eat into your profits. To reduce operating expenses, consider purchasing a property that is already in good condition and investing in energy-efficient appliances and fixtures.
An Investment property guide

How to buy an investment property

When making an offer to purchase a home you will have to come up with a deposit to show the sellers that you are committed to the purchase. If you don’t have the money right away you can look into getting a loan to buy investment property with companies such as Symple Loans that offer personal unsecured loans online. You can apply for and get the funds quickly and easily so you can make a strong offer on your investment. 

Pros and cons of buying an investment property

There are both pros and cons of buying an investment property. Some of the pros include the potential for high returns, the tax benefits, and the hedge against inflation. However, there are also some risks associated with investing in property, such as the possibility of tenant damage, vacancy periods, and unexpected repairs. If the property you purchased needs some renovations or updates before renting or selling you can look into getting a loan to renovate investment property with Symple Loans. A loan can provide you funds you need now so you can make money quickly on your investment. 

Before deciding to purchase an investment property, it is important to carefully consider all of the pros and cons. Doing so will help you to make an informed decision about whether or not investing in property is right for you. 

Resources

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